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Solar PPA/Leasing v.s Solar Ownership

Everything you need to know about PPA, and leasing

Updated September 4, 2020

Solar power purchase agreements (PPAs) are a popular financing option for those looking to start solar projects in the United States.

 

PPAs allow you to install a home solar system on your roof with no upfront costs. 

However, while zero-down plans sound like a great idea, solar PPAs do come with some disadvantages. 

We take a look at the pros and cons of solar PPAs and how much they can save you on your electricity bill. 

What is a solar power purchase agreement? 

 

A solar PPA is a type of lease. With a PPA, a homeowner does not have to pay for the upfront costs of a solar system. 

Instead, they enter a contract with a third-party owner or solar developer who will take care of the design, permitting, and installation of their solar panel system. 

In return, the homeowner pays the developer for the energy the solar panels produce at price lower than the utility’s cost of electricity. 

How does a solar PPA work? 

 

A homeowner, also referred to as the host customer, can enter a PPA with a solar installer with terms that range anywhere from five to 25 years. The solar developer will install the panels on the host customer’s roof, which will cover the home’s electricity usage. 

If the solar panels produce more energy than the home needs, the extra kilowatt hours will be sent to the utility grid. The good news is, PPAs allow you to take advantage of net metering benefits your utility offers, so you can wipe out your utility bill. 

However, because the solar developer owns the solar system, and not you, they get to receive incentives like the federal tax credit and SRECs

However, this doesn’t mean you don’t have an electric bill. Because you don’t own the solar panels on your roof with a PPA, you send a monthly payment to the PPA company for each kilowatt hour of solar energy you use. 

The PPA company will charge a price lower than the utility rate of electricity, so the electric bill you receive from the solar developer will be less than what you would have paid your utility for energy. Most solar PPA agreements also include a price escalator, which means the amount you pay for solar will increase each year. 

If you need more electricity than the solar panels produce, you will pull electricity from the grid. This means that you will have two electric bills: 

  • A bill from your utility company for the energy you consumed from the grid

  • A bill from the solar company for your PPA payment

At the end of your PPA contract, you can choose to renew the agreement, have the system removed, or purchase the solar panels at fair market value. However, purchasing the system at the end of the contract would actually cost you more in the long run than if you had purchased a system to begin with.  

What are the pros and cons of a solar PPA? 

 

Pros

  • No upfront costs 

  • Energy bill savings and net metering benefits

  • Predictable energy pricing

  • Not responsible for system maintenance/monitoring

Cons

  • Not eligible for federal tax credit or other incentives

  • Lower long-term savings compared to purchasing a system

  • Entering into a long-term contract

  • Can be difficult to pass over agreement when trying to sell home

 

 

 

Benefits of owning solar panels

Published September 4th, 2020

What are the benefits of purchasing a solar system vs. leasing one? In this article we will take an unbiased look at both options and help you, the homeowner, to get a better sense of what`s the better choice in your particular situation.

It`s more than six years since SunRun introduced “zero-down” payment schemes for solar. Third-party ownership has turned out to be a complete game changer for the solar industry. The company recently announced a growth of 80% in California in only one year.[1] Another study revealed that more than 70% of Californians who go solar prefer third-party ownership.[2] Similar numbers can be found in other sunny states across the country as well.

You save more money by buying

 

There is more money to save (in the long run) if you purchase a solar system in cash or finance. As the owner of the solar system, you receive all the rebates (in some areas up to $6,000 per kilowatt), the 26% tax credit and the additional SREC income that your new solar panels produce.

Loaning is usually wiser than leasing. Most homeowners finance their solar panels through a home equity loan or a second mortgage. Many solar installers offer long-term financing at very affordable rates. If you were financing through a loan that is equivalent to a typical solar lease, you would be paying somewhere between 2.99-5.99 in interests (usually tax deductible).

Solar panels will increase your home value

 

How much is the big question. Here`s a rough estimation to give you an idea of what quantities we`re talking about: A solar system that is producing $1,500 in annual savings with a prevailing fixed mortgage rate of 5% would increase your home value somewhere around $30,000 ($1,500/0.05).

A study conducted by National Renewable Energy Laboratory (NREL) concluded that homes with solar panels sell 20% faster and for 17% more money.[3]

A lease is not an investment

I often advice people to look at purchasing a solar system as a long-term investment. I want to emphasize that a solar lease is not an investment – you do not have ownership of the solar system itself (you have no assets). A solar lease is a long-term year commitment to 10-20 years of lease payments. When would you financially commit yourself to rent a home for 10-20 years?

Solar leases may reduce your home value

You will find leasing companies that advertise increased home value with their solar leases. In some cases this is true (homes with lower electricity bills tend to be worth more). However, a solar lease can also be a hindrance when you`re trying to sell your home. Finding a buyer that qualifies with excellent credit and agrees to assume your solar lease can be tough. Alternatively, paying yourself out of the lease can be very costly.

What are the pros and cons of a solar ownership? 

 

Pros

  • No upfront costs 

  • Energy bill savings and net metering benefits

  • Predictable energy pricing

  • Not responsible for system maintenance/monitoring

  • Tax credits and rebates

  • Free energy… eventually

  • Resale value

Cons

  • Time

  • Entering into a long-term agreement

WHY HAS THE cost of eLECTRICITY CONTINUES TO RISE Over the YEARs?

  • Minimum Wage is INCREASING every year.
  • Some of our power plants are over 100 years old and are getting retired so your ELECTRICITY LANDLORD are rebuilding new ones which will cost 2 TRILLION dollars.

  • The union works got a new contract that will INCREASE their salary rate for years to come

  • Electricity is formed by FOSSIL FUEL and its cost allot to bring from overseas during these times

  • Some owners will be switched to Time Of Use so your ELECTRICITY LANDLORD can gain more of a profit from homeowners

WHY SHOULD YOU CONSIDER SWITCHING TO SOLAR?

  • ZERO OUT OF POCKET to switch.

  • Solar Is LESS EXPENSIVE than your electricity landlord

  • You CONTROL your rates and you wont see an increase every month.

  • The FEDRAL GOVERNMENT is encouraging Homeowners to go solar. You'll receive an INCENTIVE UP TO $26,000 depending on your ZIP CODE. CHECK TO SEE IF YOUR HOME QUALIFIES

  • The electricity Landlord BUYS electricity from homeowners with solar panel you will get CREDIT from NET METERING 

  • It’s clean and our PLANET loves it

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